Trade deficit declines in May

But US imbalance with China increases

By Associated Press | July 14, 2005

WASHINGTON -- The trade deficit fell in May, reflecting a rise in US exports to the highest level in history and a temporary decline in foreign oil prices. But the improvement is likely to be short-lived, with oil prices again hovering around record levels.

The Commerce Department said yesterday that America's trade imbalance declined to $55.3 billion in May, an improvement of 2.7 percent from April.

However, the deficit with China rose to $15.8 billion, the highest since last November, pushed up by a 12.8 percent surge in imports of Chinese clothing and textiles. In the first five months this year, Chinese clothing and textile shipments are up 53.6 percent from the same period in 2004.

Even with the narrowing of the overall deficit in May, the trade imbalance through this year's first five months is running at an annual rate of $681.6 billion, 10 percent above last year's all-time record of $617.6 billion. Analysts believe the underlying trends are so strong that the deficits this year and in 2006 will set record highs.

''There is no question that the deficit this year will be worse than last year. A number of the improvements in May were temporary," said Nariman Behravesh, chief economist at Global Insight, an economic forecasting firm in Lexington, Mass.

Analysts noted that while global oil prices declined in May, fears about adequate supplies have sent prices surging in recent weeks to record levels.

Critics blame the deficits on free-trade policies pursued by President Bush and his predecessors. They contend those policies have failed to protect American workers from unfair overseas competition, prompting American companies to move production to low-wage countries.